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Showing posts with label surplus. Show all posts
Showing posts with label surplus. Show all posts

## Calculating equilibrium and surplus with a tax, a question and answer

06:23

This intensive economics question goes over calculating equilibrium price and quantity, then using those numbers to get consumer and producer surplus, and finally implementing a tax to see how that will change the previous results:

1. The inverse demand curve (or average revenue curve) for the product of a perfectly competitive industry is give by p=80-0.5Q where p is the price and Q is the quantity. The short-run industry marginal cost function is MC=50+0.25Q

a) Calculate the equilibrium price and quantity assuming perfect competition and profit maximization and hence calculate the consumer and producers' surplus.

## Consumer and producer surplus with a change in supply, a question and answer

01:38

This article is a question and answer for the economics of consumer and producer surplus.  The following question was presented:

I have an equilibrium chart where supply and demand intersect at 5. The price is 1\$ for 1 good. The question is: assume that the cost of producing that good increases by 2\$ at every possible quantity. Recalculate the consumer and producer surplus at this new equilibrium and determine if it is efficient.

My original chart has a max height of 10 and max width of 10. The supply and demand curves intersect at 5 high 5 long.

## Finding consumer surplus without a graph

14:15
This post goes over one example of finding consumer surplus, if you would like more information on consumer surplus, including what it is, and how to calculate it using a general form, check out this other post.

Here is the actual question we are going to discuss in this economics post:

Nick can purchase each milkshake for \$2. For the first milkshake purchased Nick is willing to pay \$4, for the second milkshake \$3, for the third milkshake \$2 and for the fourth milkshake \$1. What is the value of Nick's consumer surplus?
a.\$2
b.\$9
c.\$3
d.\$10

## What is producer surplus, and how to calculate it.

21:10
Producer surplus is when a producer essentially makes profit off of a good or service they are selling.  When you are drawing the supply curve, it represents the price the firm is willing to sell a good or service for at all of the different possible quantities.  However, when equilibrium price is found, the firm gets to sell all of his goods or services at that equilibrium price, instead of the other prices he was willing to sell for at other quantities.

Most of the time, the supply curve will intersect the price and quantity axis at the origin (0,0).

18:22

## What are positive externalities? A case study of online Universities

18:18
This post will describe what a positive externality is, and how the market for a University is inefficient because of them.  When deciding to go to an University you have to weigh several factors in your decision making process.  One of the most important of these factors is price.  As the price gets higher, you will see less and less students willing to go to University, which results in our typical downward sloping demand curve.  Likewise, Universities are willing to supply more education if they receive more money for providing their services.  This results in a typical supply and demand graph shown to the right.  However, this graph doesn't tell the whole story.  After receiving an education, graduates will be able to get a better job, and contribute more to society and the general economy then they would be able to otherwise, this results